These were not very popular machines, and my experience is limited to the three I installed. Two had the 6MB control and the last one the 0. These were actually made by YASUDA for Bridgeport. The first 2 required a lot of attention, including replaceing the B axis bearing, brakes, and motor. The pallet changer motor was also replaced. The newer machine seemed to have a lot of the bugs worked out. I commend you on the encoder change. It is not easy to get to those parts.
May I suggest that you carefully watch the spindle as it proceeds up into the tool holder. One of the things that would drive us nuts is that as the tool entered the fingers, it had a tendency to rotate the spindle. This was corrected by adjusting as best as possible the position of the tool holder fingers so they rubbed the same amount. It is not easy.
Is it possible that if you do lose your orient, then it faults and it comes out of the tool change subroutine and gives the Y axis fault. I remember that under "normal" conditions, the Y would not go that high and the tool change macro tricked the control into allowing the Y axis to go there.
George
(Note: The opinions expressed in this post are my own and are not necessarily those of CNCzone and its management)